Leveling the Field for Gender ParityBy Alejandro Ehrenberg | Wed, 10/16/2019 - 17:56
Q: How would you assess the relationship between the new administration and private industry?
A: In this new landscape, we have a great advantage given that Deputy Minister of Mines Francisco Quiroga is knowledgeable about the sector and is committed to its development. We speak the same language but at the same time he can serve as a translator to communicate our main interests and encourage understanding. I certainly believe that much information that has been publicly expressed by the government is derived from the poor communication between President López Obrador and public officials. As soon as we approached the administration and our ideas were heard, the tone radically changed. Given this industry’s nature, we can reach locations where no one else is working. Our activities are backed up by infrastructure and development opportunities for these communities and mining is known for providing them. This is a long-term relationship and our participation must be well-received to achieve the social permit.
Q: What elements should be present to ensure the correct development of the industry in the coming years?
A: The new policy approach must provide certainty. Investments in the mining industry are long-term and sponsors need to be sure that the rules of the game will not change. Latin America has some very good examples of these practices. For instance, Peru works under the tax stability convention where taxes are established in periods of 15 to 20 years. This provides certainty for economic models of profitability projections. We executed a study together with CAMIMEX and an international adviser in which we compared the tax payments and rights of the mining industry in Mexico with other countries like Canada, Peru, Chile, Australia and the US. The results demonstrated that companies operating in Mexico pay up to 54 percent more in taxes and rights compared to the US where the payment is 22 percent.
Another indispensable topic is competitiveness, which depends on three main factors. First, the basic infrastructure of each country, which is in the hands of the government. Second, the technology and staff of each company. Third, the market’s location. As for the government, it must fulfill its responsibilities. For instance, in the previous years, Mexico was not very competitive on electricity tariffs. To date, we still pay US$0.10 per kWh when in other countries like Canada this amount equals US$0.02 per kWh, in Peru US$0.04 kWh and in the US US$0.06 per kWh. In this industry, competitiveness takes place on a global scale. If Mexico works with electricity prices that are two, three or even five times higher, national competitiveness sees a relevant reduction. To face this challenge, we decided to generate our own electricity. In 2018, 92 percent of our consumed energy was acquired under a self-supply scheme and out of this amount, 31 percent came from renewable sources. By 2020, our goal is to increase this by 50 percent toward our main objective to become 100 percent renewable by 2027. This represents a double commitment because we can become more efficient and increase our competitiveness and at the same time support the energy transition. Other basic infrastructure, such as ports, roads, railways, transmission lines and gas pipelines, are the government’s responsibility. If the country does not have an adequate vision, competitiveness will be threatened. Not only in the mining sector, but in every industrial activity in Mexico.
Q: What was the main motive behind the company’s strategy to refinance its debt?
A: About US$800 million in Industrias Peñoles’ long-term debt was going to expire in the next four years. We decided that the positive interest rate conditions in the market were favorable for a bond issuance under the 144A rule. This framework allows international investors to participate in the transaction. The issuance was a success as we were able to raise US$1.1 billion in 3Q19. In these processes, you can measure the level of appetite the company’s debt attracts. In this specific case, it resulted in a 6:1 ratio, which showcases Peñoles’ positive market image and reputation. This was a major achievement as the company had never raised a 10-year debt. Now, US$550 million is on a 10-year a scheme and another US$550 million was raised over a 30-year period.
Q: What have been the major results of the company’s plan to export zinc to the US market?
A: The project to expand our capacity at Torreon started operations in 2019 and consisted of a 360,000-ton expansion. This will provide many benefits. By introducing a new process, we will be able to treat all kinds of zinc concentrates. Industrias Peñoles also will be one of the few zinc refineries in the world. We have increased our exports to the US by 30 percent since 2018. Hence, I am confident that by 2020, we will achieve a major penetration in the US market. Regarding this commodity, our coverage has already reached the European, Central and South American markets. Our objective is to gain a major foothold in the US, without neglecting other geographies. Given the automatization levels of our processes, Peñoles has been able to achieve its targets faster. Another advantage from a technological standpoint is that with traditional processing technology, zinc generates sulfuric acid as a sub-product. This product is very difficult to commercialize and by introducing this new process, we can avoid that step.
Q: What is the role of the Capela mine project within your operations in Mexico?
A: Capela is a very interesting mine given its polymetallic nature. This means gold, silver, copper, lead and zinc can be found in this deposit and hence, we will be able to produce three types of concentrates. This asset will have a total milling capacity of 4500t/d, which positions Capela between a middle-sized and large-sized mine. Due to the frameworks that rule different minerals, we expect it to be one of the group’s best mines. The construction phase has properly advanced and we are executing equipment tests. Our goal is that by November 2019 we can start introducing milling loads as the mine is already operating.
The social work we have done there has been very important as Tololoapan is a complicated zone given the security factor. Five years ago, we launched our social strategy so that the communities could get to know us and trust our work. To date, many micro-enterprises have been developed. We also have trained 104 young people in technical careers and with these skills they will operate in our mines. Industrias Peñoles has a dual education program in partnership with the German government and we have been training young people from communities under this scheme.
Q: What advances are expected from other relevant projects such as the Bismark and Reina del Cobre mines?
A: Reina del Cobre is a very important project for us because it consolidates the Velardeña region as a true mining district. This project untaps this region’s potential as it also encompasses La Industria mine, where we are executing exploration activities. We already have a significant presence in the region. Velardeña was born six years ago with a capacity of 6,000 tons. To date, we have reached 7,000 tons and by the end of 2019 we expect this number to grow to 8,000 tons. Hence, the region’s potential is still open and it is a promising opportunity to continue investing in exploration activities.
Bismark is an existing asset with many people depending on the mine. The closing of a mine is one of the most difficult experiences a company faces as there is a relevant human factor involved. For us, this asset is important for this particular reason, which is why we need to continue exploring with good results. At the moment, we are executing inside drilling works to convert these spaces into additional reserves.
Q: How does Industrias Peñoles strengthen the development of gender equality in the mining industry?
A: The mining industry is one of the most chauvinistic sectors globally. In previous years, physical force was required and working conditions were not the best. This has radically changed in recent years because technological advancements demand intelligence, and intelligence has no gender. As Industrias Peñoles has heavily invested in technology, we have provided the opportunities to reach gender parity. At a global level, women represent 12 percent of the labor force in the mining industry. In Mexico, this number totals 17 percent and we have worked closely with CAMIMEX to increase it further. For its part, Peñoles is outperforming the sector, having already reached a 20 percent participation for women. Nevertheless, this number is not enough and we have a long way to go. I do not believe in gender quotas because it is more appropriate to have the conditions to promote development without favoring any gender. In terms of the company’s generational profile, 67 percent of our employees are aged under 35 years. Even though Industrias Peñoles has over 132 years of experience in the Mexican market, it also has a young environment.